Here's the main problem: Since peaking in 2005, home values have plunged as much as 64 percent or more in many counties in the nation.

As a result, many homeowners owe substantially more on their mortgages than their homes are worth.

The new federal refinancing deal, unfortunately, is only being offered to home-owners whose first mortgage only slightly exceeds their home's value.

Specifically, these programs will help people whose loans do not exceed 105% of their current home value. For example, if your home loan is for $315,000 and your current home value is $300,000, you would qualify for these programs. However, if your home loan is higher than that and your home value is the same, these programs will not help you.

Unfortunately most people find themselves with loans way higher than their current home value.

A typical scenario is that the loan is for $500,000 while the current home value is $350,000.

What can a person who finds him /her self in the above situation do?

The first step is to talk to your lender and try to work something out to negotiate a reduction on your loan. Should you have difficulty dealing directly with the lender, there are many companies that offer “loan modification” services. Make sure that you select a reputable company and, in either case, address the fact that your primary target is principal reduction, not reduction on the interest rate.

The second step is a short sale. You list your property with a local broker and you accept offers subject to your lender’s approval if the offer is less than your loan amount. In many cases the lenders approve the offer, the house is sold, and you walk away with your credit intact.

The third option (and it is an option) if none of the two options above worked is to stop making your loan payments. About the second missing payment, your lender will start sending you letters stating its intention to foreclose on your loan. Take this opportunity to negotiate with your lender. Submit any hardship you are experiencing (loss of a job or income, sickness, etc) in writing. Be truthful as the lender will verify your statements. Even during this period you have a good chance to work out something with your lender. If all fails, then you have approximately five months of free rent until you have to vacate the property. This is the average time it takes in most states from the day a Notice of Default is filed to the day the property is taken back by the lender and is auctioned to the public for sale. Most of the properties will not actually be sold at the auction. The reason for this is that the minimum bid asked includes the full amount of the loan plus the expense of the foreclosure, the combination of which is way above the current market value. When the property does not sell at the auction, the lender has to “warehouse” it until it lists the property with a local broker at the current market price in order to sell it. That can give you some additional time to stay in the property payment rent free. In many cases that can be a savings of $10,000 or more to you.

Now, of course the foreclosure will affect your credit rate adversely. However, you can always re establish credit and when the economy starts moving again your credit will be fully restored.

During similar periods in the 80s and 90s, most people were able to restore their credit and, when asked by an institution during a loan application about the foreclosure in their report, were able to honestly state in writing the prevailing circumstances of the time. In my experience, nine people out of ten of these individuals successfully got their loans.

Tuesday, August 08, 2006

residential foreclosures hit its highest level

The number of new residential foreclosures hit its highest level of the year in July, while the active foreclosure inventory for the month actually dropped 3.1 percent from the June level, according to Foreclosure.com, a company that tracks foreclosure information.

There were 28,130 new residential foreclosures in July -- a 4.95 percent increase over June and a 10 percent increase from July 2005. Michigan, Colorado and Ohio were among the states hardest hit..

Fed takes a break from interest-rate hikes

The Federal Reserve on Tuesday ended two years of 17 consecutive increases in the federal funds rate, letting it stay put at 5.25 percent.

The Federal Open Market Committee may not be done raising interest rates to keep inflation in check, saying "some inflation risks remain." But unemployment in July rose from 4.6 percent to 4.8 percent and economic growth slowed to 2.5 percent this spring, off by nearly half from the pace of the first three months of the year.

"Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices," the committee said in a statement. Inflation risks remain, and "The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."The decision to take a break from interest-rate hikes was expected, and long-term mortgage rates had already fallen to four-month lows in anticipation of the move. The 30-year fixed-rate average sank to 6.07 percent overnight, and the 15-year rate dipped to 5.78 percent.

Wednesday, July 19, 2006

Does Your Mortgage Professional Really Know the Industry?

Does Your Mortgage Professional Really Know the Industry?

I'm sure you'll agree that a home mortgage is one of, if not the largest, financial investment a person will make in their lifetime. I'm sure you'll also agree that given the importance of this investment you would want an industry professional who knows their industry! With that in mind here are a few questions to ask to assure yourself that the professional with whom you are talking has a handle on the industry and, directly, your best interests.

1. What are interest rates based on? Mortgage interest rates are based on the yields of Mortgage Backed Securities or Mortgage Bonds. Bonds are bought and sold daily by large investors. Bond prices, just like stocks, fluctuate by the minute. If your mortgage person states that rates are based on Fed Funds rates, i.e. the Prime Rate or Treasury rates, they are dead wrong.

2. What's the economic event that may cause interest rates to move? Bond Markets are concerned with the pace of economic growth and inflation. Generally speaking mortgage bonds move opposite of the stock market. So as the stock market improves, mortgage bonds generally drop in price, bad for mortgage interest rates (increase).The most important report is the Employment Report issued on the first Friday of every month by the Bureau of Labor Statistics. Stronger than expected employment growth would be bad for interest rates. A second report may be the Consumer Price Index issued monthly by the Bureau of Labor Statistics. Strong economic growth shifts money out of the bond market into stocks. This shift would cause bond prices to drop thus mortgage interest rates will rise.

3. When the Prime rate goes up, what happens with mortgage interest rates? The Federal Reserve Bank only controls the Discount Rate and the Fed Funds Rate, components of the Prime Interest Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another. The mortgage bond market controls mortgage interest rates. Very often mortgage rates travel in the opposite direction of the Prime Rate.

4. What's happening in the market now and what do you see ahead? There is sufficient market information on a daily basis that allows a mortgage professional to recognize trends. For instance, if the employment numbers are to be released tomorrow and you are not locked in to your interest rate for your new mortgage loan, it would be imperative to determine potential market direction to decide whether to lock or float your new loan rate. A response such as "Gosh, if I could predict the future I wouldn't have to work for a living" would be a huge red flag that your mortgage professional is not engaged in their industry.

Thursday, June 29, 2006

The last four months the continuing increase of interest rates has had adverse effect on the real estate market.

The Fed will continue to raise the key rate for a while.

You can still get a low interest loan, if you take the time to compare loan products in the market and identify one that fits your needs.

There is much advertising, with attractive come ons like 1% interest only payments for loans that the actual interest is 6.875%.

Here is the problem with this scenario.

The remaining payment interest of 5.875%, goes back to the original loan amount and you ending up having a higher loan amount, than the one you started (negative amortization).

If property values continue to rise the negative effect is small.

If property values level or decline, the effect can be devastating. One can have a larger loan amount than the value of the property (1990 era).

Time is of the essence as interest rates are rising.People with variable interest rate loans are under pressure to meet their monthly payments.

An increase of 1% can increase the monthly payment easely $350 to $ 400 per month.

The increase is approximately $70 per hundred thousand. With the average loan amount of $400,000 in California, it can become a painful experience very fast.

That’s why you need to deal with a professional mortgage lender,who can analyze your individual situation and guide you through the process. We provide this service free to our clients every day and we hear horror stories from their experience elsewhere.

Saturday, May 27, 2006

About Me

My name is Chris Eliopoulos I live and work in Beverly Hills CA. I am a broker specializing in real estate sales and financing. I welcome your questions about loans, properties, or any other aspect of real estate. E-mail me at christosel@gmail.com.
"We will either find a way, or make one."